RACQ Insurance has rejected a proposed mutual insurer for north Queensland as too expensive to set up and too complex for consumers.

In its submission to the Northern Australia Insurance Premiums Taskforce, it instead suggests a building-retrofit program combined with a cyclone subsidy pool for high-risk properties.

“This approach is sustainable and effective, addressing the base cause of issues, and provides maximum benefit to the consumer with minimised ongoing support by the Government,” the Brisbane-based insurer says.

The taskforce is considering options including a mutual insurer and reinsurance pool.

RACQ Insurance says a subsidy pool would help tackle affordability issues.

It says there has been no market failure in north Australia and “government intervention in the form of a government-funded mutual cyclone reinsurer or cyclone reinsurance pool is not the ideal solution”.

RACQ Insurance supports the Insurance Council of Australia’s proposal for individual assessment of properties, followed by retrofitting if needed.

It says the concept of a mutual insurer is too complex and confusing at claim time for consumers, which may widen gaps in cover. Floods resulting from cyclones may not be covered by a mutual, and it may also exclude extra cover for things like food spoilage, up to a year’s temporary accommodation while a home is repaired, counselling and storage costs.

The cost of setting up a mutual insurer “owned” by the community would also be significant for the Government, and there are concerns over long-term funding and the ability to pay all claims in a catastrophe, according to RACQ Insurance.

It says a reinsurance pool would have to offer a substantially better reinsurance premium.

In other markets such as New Zealand similar schemes have not reached self-sustainability, and mitigation must be an important component of efforts to reduce premiums.

RACQ Insurance says north Queensland homeowners appear to be willing to cyclone-proof their homes if it reduces premium, so it is critical to link mitigation to subsidies.

Reducing insurance taxes and duties in high-risk regions could save consumers 19-20% on premium costs, RACQ Insurance says.